Correlation Between Aurelia Metals and EROAD

Can any of the company-specific risk be diversified away by investing in both Aurelia Metals and EROAD at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aurelia Metals and EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aurelia Metals and EROAD, you can compare the effects of market volatilities on Aurelia Metals and EROAD and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aurelia Metals with a short position of EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurelia Metals and EROAD.

Diversification Opportunities for Aurelia Metals and EROAD

-0.24

Correlation Coefficient

Aurelia Metals  EROAD

Very good diversification

The 3 months correlation between Aurelia and EROAD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD and Aurelia Metals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aurelia Metals are associated (or correlated) with EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and EROAD go up and down completely randomly.

Pair Corralation between Aurelia Metals and EROAD

Assuming the 90 days trading horizon Aurelia Metals is expected to under-perform the EROAD. In addition to that, Aurelia Metals is 1.26 times more volatile than EROAD. It trades about -0.05 of its total potential returns per unit of risk. EROAD is currently generating about 0.41 per unit of volatility. If you would invest  83.00  in EROAD on September 26, 2024 and sell it today you would earn a total of  24.00  from holding EROAD or generate 28.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aurelia Metals  vs.  EROAD

Aurelia Metals

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Aurelia Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, EROAD is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aurelia Metals and EROAD

The main advantage of trading using opposite Aurelia Metals and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurelia Metals position performs unexpectedly, EROAD can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EROAD will offset losses from the drop in EROAD's long position.

The idea behind Aurelia Metals and EROAD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.